2011 (4) TMI 11 - HC - Service Tax

Transport department orders quashed for defective show cause notices regarding tourist vehicle permits

M SUGANTHI, THIRUMURTHY BUS TRANSPORT and K MAHALINGAM Versus ASSTT COMMISSIONER OF CENTRAL EXCISE, POLLACHI

The Madras HC quashed orders related to stage carriage tour operating service tourist vehicles and spare bus permits. The court held that the show cause ... Stage Carriage – tour operating service – tourist vehicles - spare bus permit – Held that: - as the show cause notice was bad in law in not taking into consideration the purpot and intent of the direction issued by the Hon'ble Division Bench in paragraph 36 of the Judgment in The Secretary Federation of Bus Operators Association of Tamil Nadu (2001 (4) TMI 7 - MADRAS HIGH COURT) and consequently, the subsequent action/proceedings are also vitiated and the impugned orders are also bad in law – department has been given liberty to issue fresh show cause notice Issues Involved:1. Liability for service tax on spare bus permits.2. Violation of principles of natural justice.3. Definition and classification of 'tourist vehicles' and 'stage carriages'.4. Availability of alternative remedy.5. Validity and sufficiency of show cause notices.Issue-wise Detailed Analysis:1. Liability for service tax on spare bus permits:The primary issue was whether the petitioner, a stage carriage operator with a spare bus permit, is liable to pay service tax under the Finance Act, 1994. The respondent issued notices directing the petitioner to register and pay service tax, classifying them as tour operators under Section 65 (78) of the Finance Act, 1994. The petitioners contended that their spare buses were not 'tourist vehicles' as per Section 2(43) of the Motor Vehicles Act, and thus, they should not be liable for service tax.2. Violation of principles of natural justice:The petitioners argued that the impugned orders violated principles of natural justice as they were not afforded an opportunity for a personal hearing despite specifically requesting it in their replies to the show cause notices. The court acknowledged this violation and emphasized that the existence of an alternate remedy does not bar the court from entertaining writ petitions if there is a violation of natural justice.3. Definition and classification of 'tourist vehicles' and 'stage carriages':The court examined whether the spare buses could be classified as 'tourist vehicles' under Section 2(43) of the Motor Vehicles Act. The petitioners argued that their spare buses were stage carriages with specific seating arrangements and operational characteristics distinct from tourist vehicles. The court noted that the respondent failed to consider these specific distinctions and relied on conjectures, which was inappropriate for determining tax liability.4. Availability of alternative remedy:The respondent argued that the writ petitions were not maintainable due to the availability of an efficacious alternative remedy of appeal. However, the court held that since the primary ground for challenging the impugned orders was the violation of natural justice, the existence of an alternative remedy was not an absolute bar. Additionally, the writ petitions had been pending for nearly ten years without a counter affidavit from the respondent, making it harsh to direct the petitioners to pursue the alternate remedy at this stage.5. Validity and sufficiency of show cause notices:The court found that the show cause notices issued to the petitioners were insufficient and did not comply with the directions of the Hon'ble Division Bench in the case of The Secretary Federation of Bus Operators Association of Tamil Nadu. The notices lacked specifics and merely referenced the dismissal of previous writ petitions without addressing the petitioners' specific circumstances. The court held that the respondent should have provided a detailed notice allowing the petitioners to establish whether their spare buses were tourist vehicles as defined under the Motor Vehicles Act.Conclusion:The court allowed the writ petitions, setting aside the impugned orders and granting liberty to the respondent to issue fresh show cause notices in compliance with the observations made in the judgment. The petitioners were entitled to submit their replies and be afforded a personal hearing before any decision on fresh proceedings. The court emphasized the need for the respondent to render specific findings based on the definitions provided in the Motor Vehicles Act and not on conjectures.